Connacher poised for great leap forward; Algar nearing completion; Bitumen production to double in next two years; Pod One increasingly reliable; Reserve and resource values rising; Core hole drilling at Great Divide in 2010 expected to expand volumes and values in mid year 2010 evaluation, based on results in hand

CALGARY, March 18 /CNW/ - Connacher Oil and Gas Limited is poised for significant production growth over the next two years, with the impending completion of Algar, the company's second 10,000 bbl/d steam assisted gravity drainage ("SAGD") plant at its Great Divide oil sands project in northeastern Alberta. The project is on time and on budget and commissioning is anticipated to commence in mid-April 2010, with first bitumen production anticipated around mid-August 2010. Thereafter, production volumes will gradually be ramped up towards the plant's productive capacity. This is anticipated to result in Connacher's total bitumen production at Great Divide reaching 18,000 to 20,000 bbl/d by mid-2011.

We are experiencing increasingly reliable production from our first oil sands plant at Great Divide Pod One. Our Pod One nameplate steam generating capacity is slightly in excess of 27,000 bbl/d. With the installation of nine additional downhole pumps scheduled for April and September and with continued steam injection optimization, we are targeting an average steam/oil ratio ("SOR") of 3.2 in 2010. Accordingly, this should result in Pod One bitumen production averaging in excess of 8,500 bbl/d in 2010.

Our reserve values increased by over 40 percent during 2009. We anticipate further volume and value increases will occur with the release of our independently prepared mid-year evaluation, which will take into account the completion of Algar, core hole drilling during the first quarter of 2010 and the formal submission of our Environmental Impact Assessment ("EIA") application to further expand Great Divide bitumen production to an interim target of 44,000 bbl/d. We also anticipate additional resource recognition arising from our successful core hole drilling program at Halfway Creek. Connacher is one of the few independent public companies active in the oil sands with recognized proved producing bitumen reserves. Our goal remains to surpass 50,000 bbl/d of bitumen production by 2015.

The past year was a challenging year for all companies in our business. Crude oil prices collapsed in late 2008. This disrupted our ramp up activity at Pod One and adversely impacted on our overall operations and scheduling throughout much of the year. We suspended Algar construction for approximately six months, while we recapitalized the company to deal with the new financial realities arising from the collapse of capital and credit markets. During 2009, we raised over $400 million of new cash by accessing both equity and debt markets. As a result, we were able to enhance corporate liquidity and reinstate the Algar construction program by July 2009. Although our equity financing temporarily diluted our underlying net asset value ("NAV") per share, this proved to be temporary in nature and our enhanced year end 2009 reserve valuation restored a significant portion of our underlying NAV.

Our equity issue also enabled us to access the long term debt market on much more favorable terms than otherwise would have been available to us, if at all. The new high yield debt financing provided us with immediate incremental liquidity, without the burden of onerous financial maintenance covenants. This gave us the confidence to restore Algar construction, with the knowledge that we could meet our capital and financial obligations, without further external funding requirements and without the risk of funding being withdrawn due to any further credit market deterioration.

Later in the year, we also reestablished a revolving bank credit facility in the amount of US$50 million to secure added financial flexibility which will assist us in the conduct of our business. With Algar now anticipated to come onstream later this year, we will see a reduction in financial charges on a unit of production basis, as our production volumes expand. Having prefunded Algar, we are now scheduled to grow our production and sales into alignment with our balance sheet.

Our Q4 2009 and Year End 2009 results will be the subject of a Conference Call scheduled for 9:00 AM MT on March 19, 2010. To listen to or participate in the live Conference Call please dial either 1-647-427-7450 or 1-888-231- 8191. A replay of the event will be available from March 19, 2010 at 12:00 MT until March 26, 2010 at 9:59 MT. To listen to the replay please dial either 1- 416-849-0833 or 1-800-642-1687 and enter the passcode 59445038. You can also listen to the conference call online, through the following webcast link: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2981880

    HIGHLIGHTS OF 2009:
    
    -   Algar construction reactivated; nearing completion, on time and on
        budget
    
    -   Pod One production performance increasingly reliable with target of
        8,555 bbl/d in 2010, as additional electric submersible pumps ("ESP"
        or "ESPs") and progressing cavity pumps are installed and SORs
        decline
    
    -   Balance sheet reconstituted to overcome the impact of the 2008-2009
        collapse of commodity prices and capital and credit markets; over
        $450 million of cash and credit raised or arranged to ensure
        completion of Algar while meeting all financial obligations
    
    -   All outstanding debt is long-term, with no financial maintenance
        covenants: no maturities until 2012 ($100 million), balance in 2014
        and 2015, with no intervening principal repayments
    
    -   Company positioned to experience great leap forward in 2010 and
        beyond, with long term goal to surpass 50,000 bbl/d by 2015